Same Tax, Collected When You Pay: Bringing fairness to VAT on foreign digital services

Ghanaians have been asking if using digital services like streaming, cloud storage, or online games will become more expensive due to the new collection system. However, the VAT rate on these services has remained unchanged at 20 percent. This includes a 15 percent VAT standard rate, plus an additional 2.5 percent each for the National Health Insurance Levy and the GETFund Levy. The change lies in how the tax is collected, not the rate itself.

Previously, foreign companies were responsible for declaring their sales in Ghana and passing on the VAT. However, compliance was challenging, with only about 92 companies registered and paying the tax. About 100 others were identified as selling to Ghanaian customers without charging or paying the VAT.

In response, Parliament approved the implementation of a system by the Ghana Revenue Authority (GRA) to efficiently collect VAT starting with digital services supplied by cross-border entities. Under the new system, the VAT will be collected at the point of payment by the bank, mobile money operator, or other licensed payment company handling the transaction.

This means that customers will not notice any change in their payment process, as they will still enjoy their services without any extra steps. Each payment will result in an SMS or email confirmation, showing the exact amount charged, including VAT.

Two notable changes for consumers are the display of prices without VAT by registered providers, with the VAT added at checkout, and the deduction of VAT for the first time for customers of providers who were not charging it before. However, this is not an additional tax; it is the existing law being applied fairly to all businesses selling digital services to Ghanaian customers.